Brussels, 13/09/2011 (Agence Europe) -German Chancellor Angela Merkel, French President Nicolas Sarkozy, and Greek Prime Minister George Papandreou are reported to be holding a conference call on Wednesday to discuss the sovereign debt crisis in the eurozone in order to provide reassurance about the eurozone's ability to deal with Greece's financial woes and calm the markets, which have seen bank shares tumbling rapidly. Since the end of June, the level of capital in European banks has fallen sharply (down 62% in the case of Société Générale, -54% for Crédit Agricole, -53% for Unicredit and -49% for Deutsche Bank, according to Tuesday's edition of the French business newspaper Les Échos).
The German Chancellor quashed rumours about a Franco-German initiative when she emerged from a meeting on Tuesday 13 September with Finnish Prime Minister Jyrki Katainen, and said that she was sure a satisfactory solution would be reached for Finland for the collateral it is demanding for its share of the second Greek bailout. Preparing to meet the president of the European Council, Herman Van Rompuy, in Paris, the French president also quashed rumours about a joint Franco-German statement.
Italy. Earlier in the day (in Brussels), Van Rompuy said that determined, courageous action was required in difficult periods. Following an interview with Italian Prime Minister Silvio Berlusconi, he hailed the Italian government's “ambitious package of austerity measures” which aims to reach a balanced budget in 2013. He said that introducing the measures was crucial for Italy and for the eurozone as a whole. Another step in the right direction, he said, was the plan to introduce a golden rule into the Italian constitution to ensure a balanced budget from the 2014 tax year onwards.
Berlusconi said that the Italian parliament would vote without amendment a €54 billion package of measures on Wednesday, equivalent to 5% of the country's GDP. The measures include increasing VAT to 21%, a one-off tax on income of more than €300,000 a year and increasing women's retirement age in the private sector to 65 in 2014 (see EUROPE 10447). Italy's prime minister said that structural measures would also be introduced to reduce “bureaucratic oppression”, like speeding up judicial proceedings, reducing the number of parliamentarians and scrapping whole departments. He praised his country's manufacturing performance (second in Europe, after Germany) and its robust private savings and banks.
On the question of boosting economic governance (to be discussed by Europe's leaders in October following proposals to be unveiled by Van Rompuy), Berlusconi said Europe could encourage the member sates to increase the retirement age to match increased life expectancy because this would ensure that countries' leaders did not lose the support of voters by taking such an unpopular measure unilaterally. The Italian media report that this visit to Brussels and Strasbourg enabled Berlusconi, the “Cavaliere”, to avoid appearing in the media as a victim as part of the court case against a businessman accused of blackmail and extortion. Italy is reported to be negotiating with China to get Beijing to buy into Italian bonds.
After his meeting with Silvio Berlusconi in Strasbourg, the president of the European Commission, José Manuel Durão Barroso, said that Italy's planned budget measures were crucially important to ensure people had confidence in Italy and the in the eurozone. In a press release, he said the measures would enable Rome to achieve its target of a balanced budget in 2013 and would remove structural barriers that were preventing Italy from reaching its full growth potential. He said that, once agreed upon, the measures had to be introduced strictly and effectively.
On reform of economic governance, Barroso agreed with Italy on the need for greater integration of the eurozone using the Community Method, adding that economic and monetary union had to be extended, along with common efforts to boost stability and growth. He said the next stages were to ensure the right methods were used to ensure greater budget coordination and common discipline in the eurozone, while ensuring the integrity of the single market and the common policies among all 27 member states.
Barroso will set out his ideas on governance in a speech on the state of the European Union later this
month at the upcoming European Parliament plenary session.
EP. MEPs will be debating the sovereign debt crisis in Strasbourg on Wednesday. On Tuesday, the chairs of the main political groups called for Greece to be kept in the eurozone (referring to comments from Germany about Greece leaving the single currency, see EUROPE 10450). The chair of the EPP Group, Joseph Daul of France, called for strong common measures in areas like taxation, pensions and innovation. Martin Schulz (S&D, Germany) said that if Greece went bankrupt, then the European Union would no longer be able to raise cash on the money markets. On behalf of the ALDE Group, Guy Verhofstadt of Belgium said that the crisis was symptomatic of the weakness of the intergovernmental system and explained the liberals' “ambitious” plan to solve the sovereign debt crisis, a plan that includes the introduction of strict budget rules, binding targets, economic convergence, an action plan for growth, creating a eurobond market and drawing up a genuinely European budget. Commenting that Greece leaving the euro would have very serious consequences, co-chair of the Greens/EFA Group, Germany's Daniel Cohn-Bendit, said he favoured pooling some of eurozone countries' debts because investor security would only return if there were a single bond market in the eurozone, rather than 17 separate debt markets. (M.B./D.D./E.H./transl.fl)